Yahoo settles with Icahn to avoid proxy fight

The battle between activist investor Carl Icahn and Yahoo took an unexpected turn today after the two cut a deal that would help prevent a proxy takeover of the search engine company’s board of directors. Icahn had promised to oust Yahoo chief Jerry Yang and board chairman Roy Bostock if his slate of board candidates were elected at the annual shareholder meeting next week.

Under the agreement, however, the Yahoo board will be expanded to 11 members and Icahn himself will be nominated to the board along with two of his previous choices. Icahn said he was pleased with the “good outcome,” but notes that a complete or search-only buyout by Microsoft should still be “given full consideration.”

With this, Icahn may have the power to finally push for a deal with Microsoft – which Yahoo has repeatedly rejected since February. The Redmond software giant has yet to comment on the matter though it has previously said it wouldn't pursue any further deals with Yahoo’s existing board. We’ll have to wait and see where this goes, but it looks like the battle for Yahoo is still far from over.